Red White and Screwed: How Wal-Mart is Killing the American Flag Business

The American flag-making business is dying. But those cheap, Chinese-made stars and stripes? They're not to blame.

atriotism used to be good business for Murray Fenwick, the owner of Stucki Embroidery, a small Catskills factory that embroiders shiny white stars onto the blue part of the American flag.

Not so much anymore.

Stucki got into the star business in 1973. After World War II, Stucki was one of hundreds of American companies manufacturing embroidery and lace for bras, curtains, garments and other textiles using enormous Swiss Schiffli embroidery machines. The 15-yard metal-and-wood behemoths have to be anchored in four feet of concrete and are controlled by Swiss watch guts programmed with long spools of punchcard paper.

As garment makers left New York and New Jersey in search of a cheaper labor in the 1970s, Stucki stayed behind in the one embroidery niche that could be both domestic and profitable: stars.

"The stars saved our business for many years there," Fenwick says. "The other embroiderers went out of business as soon as the garment business left New York."

Fenwick joined Stucki in 1962 and knows every aspect of the business, including the embarrassing task of market research.

"The only thing I didn't like was going to Macy's with my brother-in-law, the owner of the company. He'd go into the ladies department and look at the embroidery on the brassieres," Fenwick says.

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The flag business did well for 30 years. The bicentennial in 1976 and the time around the first Gulf War, 1991, meant good business.

But 2001 was spectacular.

After the terrorist attacks of September 11, Fenwick says, Wal-Mart sold a million American flags in just two days. Every single one of them contained Stucki stars.

Stucki responded by expanding—extra shifts, a new machine. By 2002, the company was making 30,000 star fields—a set of 50 stars—a week. The company created a profit-sharing plan for its employees, and chartered buses to take them to Broadway shows.

Those boom times are gone. This year, Fenwick sold two of his embroidery machines. Trenches full of gravel pock the factory floor where they stood, and their missing bulk looms around the thirteen employees who work here—a skeleton crew compared to the salad days of 2002, when Stucki's employed 65 people.

"We have had six bad years in a row," Fenwick says as he walks the factory floor with Tiffany, his Yorkshire terrier, following behind by scent, nose to the ground. She's a factory fixture, with special affection for the UPS man.

The factory feels more artisanal than industrial. Young men slice stray threads from stars while pacing wooden walkways hung on the hulking embroidery machines. A woman sitting at a sewing machine checks each star for defects and fills in missing points by hand, Betsy Ross style.

Fenwick points out his company's efforts at diversification away from stars: screen printing, embroidered patches, vinyl decals, and even some fancy work for clients like churches (metallic embroidery on priests' robes) and Walt Disney theme parks (a gauzy embroidered train for Cinderella's gown).

But the factory is made for big embroidery jobs, and the pressures that killed the bulk of the American embroidery industry in the 1960s—globalization, ever-dropping prices controlled by ever-fewer mega-retailers—are killing the star business. Especially for small shops like Stucki.

mall flagmakers are being squeezed enough to attract the jingoistic attention of politicians.

Inspired by a small flag factory in his district, Mike Thompson, a Democratic congressman from northern California, sponsored legislation in 2013 to require the U.S. military to purchase only American-made flags. The legislation was passed as part of an omnibus spending bill this February.

Flush with that victory, Thompson is now lobbying president Obama to require the entire federal government to buy American-made flags.

Although it's tempting to blame foreign-made flags for killing the flag business, it's not quite the truth.

In 2012, $3.6 million of the American flags available in the U.S. were made in China, according to census statistics compiled by the Flag Manufacturers Association of America (FMAA). But the domestic flag industry is worth $300 million, which means that foreign-made flags are only 1 percent of the market.

Reggie VandenBosch, the chairman of the FMAA, says that that's down from a whopping 20 percent just after 9/11, when American flag manufacturers, caught off guard after the end of the traditional summer flag season, didn't have enough American flags to meet the post-9/11 demand. Foreign flags—$52 million worth—filled the gap.

Thirteen years later, however, most retailers are too PR-savvy to take on the attention of waving a flag made in China.

"By and large, I can't think of a retailer off the top of my head now that will purchase imported U.S. flags," VandenBosch says.

So don't blame Asian manufacturing for killing the star business. Instead, blame the American love affair with cut-rate consumer goods.

ven when we Americans are patriotic, we can still be cheap.

"The trend in America is dollar stores," says Fenwick, sitting at his desk, which is strewn with brochures from a defunct embroidery industry association.

"You get a customer like Wal-Mart, and you think it's great," he says. "But they kill you."

The retail price of a standard nylon three-by-five-foot American flag with embroidered stars has hovered between $19 to $24 for over a decade. But the price Stucki got for its stars from its largest customer, Annin Flagmakers, which had a contract with Wal-Mart, kept falling.

Annin once paid Stucki $2.15 for each flag field. Then Wal-Mart demanded a price cut. The price dropped to $1.95, and then $1.85.

"They're trying to compete because Wal-Mart is chiseling them every year," he says. "We just got squeezed and squeezed."

Finally, Annin bought its own embroidery machines to make its stars in-house, cutting Stucki out entirely.

VandenBosch says it's the same across the entire industry. Only the big flagmakers like Annin can absorb the ever-falling prices. The little guys are left out.

"The flag industry in general has been going through a consolidation since 2005," he says. "As demand trickled off, supply was greater than demand, and as a result, pricing pressure started becoming a real issue."

It's not just consumers that want cheap flags. The government does, too.

Bruce Baley, a Democratic congressman from Iowa, has repeatedly sponsored a bill called the "All-American Flag Act," which would require the U.S. Federal government to purchase 100% American-made U.S. flags. Unlike the narrower legislation that passed this year, which only applied to the Department of Defense, the "All-American Flag Act" has repeatedly failed.

"They voted it down," says Fenwick, who has been following the bill with interest. "They said American-made flags are too expensive."

Fenwick knows that it's pure economics that is forcing his company out of stars. That doesn't make it any easier.

"I once read an economist who wrote that anything cheaper in some other county should be made there and not in America," he says. "I'd like to find that guy. I'd be very tempted, but I'd probably get arrested for assault if I met him."